State taking aim at firms that flee

Bill seeks repayment of incentives

May 03, 2003|By Christi Parsons, Tribune staff reporter.

GALESBURG, Ill. — When Maytag Corp. started talking about closing shop and moving 2,000 jobs out of town a few years ago, the community and the state mustered up millions of dollars in grants and loans to induce the appliance-maker to stay.

The company took the money but now has decided to close shop here and transfer some of those manufacturing jobs to Mexico anyway. And that has left many people feeling cheated, while adding to a growing debate in the General Assembly over whether the state should exact a price in the future on companies that accept taxpayer help and bolt soon after.

"Businesses receive a huge benefit from these incentives," said state Rep. Don Moffitt (R-Gilson), who represents this western Illinois community. "We've seen many of these handed out. That's fine, but the business needs to stay."

Inspired by the Maytag controversy and the recent closure of a big state-subsidized Motorola Inc. plant in Harvard, Illinois lawmakers are debating a plan to require companies that receive government financial incentives to create and keep the jobs and salaries they promise. If they don't, they could be required to repay some or all of the money.

While Moffitt and many others in town think the idea is fair, some local leaders are worried that such rules will make it harder to attract new employers to fill the void left by Maytag when the company's phased shutdown is completed next year.

The measure barely passed the House recently, with business interests lobbying fiercely against it and unions leading the fight on its behalf. But this week it breezed through a Senate committee and is now poised for a floor vote in the Democratic-controlled chamber.

Such a significant job loss would be a blow to any town, but those still paying for the lucrative incentives feel the hit doubly hard.

While state lawmakers wrestle with the hardball measure, many are looking to Galesburg to figure out whether the proposed change would help communities turn straw into gold or scare business away from Illinois in the future.

"I see the coin on both sides," said Bob Sheehan, Galesburg's mayor. "This could hurt our abilities to attract new jobs, not just to our area but to the whole state. [But] part of me says you make all these concessions to try to help folks out, [then] they yank the plug and leave you hanging."

The concessions were plentiful. In the mid-1990s, officials at Newton, Iowa-based Maytag started talking about whether to continue plant operations in Galesburg. State and local leaders were persuasive.

The state provided more than $7 million in grants and loans to the company, and Galesburg raised its sales tax to contribute almost $3 million. In addition, Maytag building projects have qualified for several local tax-abatement benefits totaling more than $4 million since 1987.

"We did everything we could to help them," said Eric Voyles, president and chief executive of the Galesburg Regional Economic Development Association, who thinks the investments paid off. "It only made sense."

After all, the company had an annual local payroll of some $130 million, paying hundreds of assemblers in the neighborhood of $15 an hour to put together refrigerators.

Local labor leaders got on board too. Fearing for their jobs, the machinists union voted to accept a number of contract concessions Maytag said it needed to become more competitive.

"We opened the contract and gave concessions because Maytag was threatening to leave," said Dave Bevard, president of the International Association of Machinists local that represents plant employees. "It was like, `All right, we're going to keep our jobs.'"

But last fall, city officials started wondering whether everything was all right at the plant. Company officials seemed uncharacteristically scarce, and the mayor couldn't seem to set up a meeting to figure out what was going on.

The reason became clear when Maytag announced in October plans to shut the plant in 2004 and move some operations to Iowa and the rest to a new plant in Reynosa, Mexico, where wages are expected to be around $2 an hour.

Company officials say the economic climate in Galesburg wasn't a significant factor in their decision. They say the incentives were helpful early on, but, in the end, the other sites were more cost-effective.

"This was a very difficult business decision," said Jim Powell, a Maytag spokesman. "It's one that we had to make to become more competitive in the future."

That attitude has inspired anger not only in Galesburg but also in other Illinois communities that complain of take-the-money-and-run tactics by big employers. Last month in Harvard, for example, Motorola shut a plant that had received $43 million in government incentives.